SECTION 2. BACKGROUND

For owners of automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the automobile is placed in service and each succeeding year. In the case of electric automobiles placed in service after August 5, 1997, and before January 1, 2005, § 280F(a)(1)(C) requires tripling of these limitation amounts. Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after calendar year 1988.

For leased automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the automobile.

April 27, 1998 6 1998–17 I.R.B.

for October 1987. The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor (the CPI). The new car component of the CPI was 115.2 for October 1987 and 140.6 for October 1997. The October 1997 index exceeded the October 1987 index by 25.4. The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 1998 is 22.05 percent (25.4/115.2 � 100%). This adjustment is applicable to all automobiles that are first placed in service in calendar year 1998. The dollar limitations in § 280F(a) must therefore be multiplied by a factor of 0.2205, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than electric automobiles) for 1998. To determine the dollar limitations applicable to an electric automobile first placed in service during calendar year 1998, the dollar limitations in § 280F(a) are tripled in accordance with § 280F(a)(1)(C) and are then multiplied by a factor of 0.2205; the resulting increases, after rounding to the nearest $100, are added to the tripled 1988 limitations to give the depreciation limitations for 1998.

(2) Amount of the Limitation. For automobiles (other than electric automobiles) placed in service in calendar year 1998, Table 1 contains the dollar amount of the depreciation limitations for each tax year. For electric automobiles placed in service in calendar year 1998, Table 2 contains these amounts.

REV. PROC. 98–30 TABLE 1

The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of automobiles. Under § 1.280F–7(a), this reduction requires the lessees to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. There is a table for lessees of electric automobiles and a table for all other passenger automobiles. Each table shows inclusion amounts for a range of fair market values for each tax year after the automobile is first leased.

For automobiles first provided by employers to employees that meet the requirements of § 1.61–21(e)(1), the value to the employee of the use of the automobile may be determined under the vehicle cents-per-mile valuation rule of § 1.61– 21(e). Section 1.61-21(e)(1)(iii)(A) provides that for an automobile first made available after 1988 to any employee of the employer for personal use, the value of the use of the automobile may not be determined under the vehicle cents-permile valuation rule for a calendar year if the fair market value of the automobile (determined pursuant to § 1.61–21(d)(5)(i) through (iv)) on the first date the automobile is made available to the employee exceeds $12,800 as adjusted by § 280F(d)(7).